Executive Summary / Key Takeaways

• CRA International continues its trajectory of record financial performance, achieving its highest-ever quarterly revenue and profitability in Q1 2025, building on a record-setting fiscal year 2024.
• Growth is broad-based across the portfolio, with strong contributions from both legal/regulatory and management consulting services, particularly notable strength in Antitrust & Competition Economics, Energy, Finance, and Intellectual Property.
• The company leverages advanced analytic techniques, quantitative methods, and specialized tools across its practices, providing a competitive edge through expert-driven, data-intensive consulting services that deliver quantifiable benefits to clients.
• Strategic initiatives, including targeted talent investments, geographic expansion (e.g., Texas IP footprint), and portfolio optimization actions, are aimed at aligning resources with demand and driving profitable growth.
• Management has reaffirmed its full-year fiscal 2025 guidance, projecting revenue of $715 million to $725 million and non-GAAP EBITDA margin of 12% to 13% (constant currency), signaling confidence in pipeline health and operational efficiency despite macroeconomic uncertainties.

A Foundation Built on Expertise and Analytics

Charles River Associates, operating under the trade name CRA International, has carved out a distinct position in the global consulting landscape since its founding in 1965. The company's enduring vision, rooted in applying rigorous academic expertise, particularly in quantitative methods and economics, to complex business challenges, remains central to its identity and competitive strategy today. This foundational approach manifests in CRA's core business model: providing high-value professional and consulting services across a single operating segment, segmented internally into broad areas like litigation, regulatory, and financial consulting, and management consulting.

This expert-driven model, supported by the application of advanced analytic techniques and in-depth industry knowledge, serves as a key differentiator. CRA's technological edge isn't defined by a single software product but by its sophisticated application of data analysis, economic modeling, statistical methods, and specialized proprietary tools tailored to specific client needs. For instance, in Financial Economics, they review clients' proprietary machine learning models for statistical soundness and potential discrimination risk. In Intellectual Property, they utilize economic analysis and potentially specialized valuation tools to quantify damages based on factors like customer usage metrics or comparable transactions, demonstrating how their analysis can lead to jury awards hundreds of millions less than plaintiffs sought or support significant monetary damages for clients. The Labor & Employment practice employs analysis of terabytes of data to demonstrate patterns in employee timekeeping, influencing class action outcomes. In Risk Investigations, they quantify and analyze complex financial flows and conduct detailed reviews of litigation data. These capabilities offer tangible benefits: more robust expert testimony, potentially more accurate damage assessments, deeper insights from complex datasets, and support for critical strategic decisions like utility resource planning or data center load strategies in the Energy practice. The nature of their work implies advantages in the precision, defensibility, and depth of their analysis compared to less specialized approaches. The strategic intent behind their R&D and ongoing development of these capabilities is to maintain leadership in expert-driven, data-intensive consulting, contributing directly to their competitive moat, pricing power, and ability to secure high-stakes engagements.

In the competitive landscape, CRAI operates alongside larger, more diversified firms like FTI Consulting (FCN), Huron Consulting Group (HURN), and ICF International (ICFI), as well as smaller niche players and the consulting arms of the Big Four. Compared to FCN, CRAI demonstrates strong revenue growth momentum, evidenced by its recent record quarters, though FCN holds a significant advantage in overall scale and potentially slightly better gross margins, likely due to its size. CRAI's specialized expertise, particularly in antitrust and IP litigation, allows it to command premium pricing and capture market share in these niches, potentially offering more tailored and faster expert support than FCN's broader offerings. Against HURN, which focuses on technology-enabled transformations, CRAI's strength lies in its litigation focus and expert testimony, while HURN may hold an edge in the speed of AI integration and data processing for certain tech-heavy projects. Compared to ICFI, focused on government and commercial consulting in energy and environment, CRAI's depth in economic analysis and financial litigation provides a distinct value proposition, although ICFI may lead in ESG-specific innovation and has lower debt levels.

Overall, CRAI positions itself as a premier provider of expert-led, analytical consulting, leveraging its academic roots and specialized capabilities to differentiate from competitors. Its competitive advantages lie in the depth of its expertise, the strength of its expert network, and the application of sophisticated analytical techniques. Vulnerabilities include its smaller scale relative to giants like FCN and potential lags in broad technological innovation compared to firms like HURN or ICFI, which could impact efficiency in certain areas. Barriers to entry, such as the high expertise requirements and the need for established reputations in litigation and regulatory contexts, favor CRAI's established position.

Performance Reflecting Strategic Execution

Building on its foundational strengths and strategic positioning, CRA International has delivered a period of exceptional financial performance. Fiscal year 2024 marked the company's seventh consecutive year of record annual revenue, growing by 10.2% to $687.4 million. This top-line expansion translated into even faster bottom-line growth, with net income, earnings per diluted share, and EBITDA each increasing by more than 20% year-over-year in fiscal 2024.

This momentum carried into the first quarter of fiscal 2025, which set new quarterly records for revenue and profitability metrics. Revenue increased by 5.9% year-over-year to $181.9 million. This growth was broad-based, with five practices expanding year-over-year and four – Energy, Finance, Intellectual Property, and Life Sciences – achieving double-digit revenue growth. The Antitrust & Competition Economics practice, a consistent powerhouse, also posted a new high for quarterly revenue. Geographically, international operations demonstrated significant strength, growing nearly 20% year-over-year in Q1 2025.

Operational metrics underscore the efficiency driving this performance. Consultant utilization improved to 76% in Q1 2025, up from 73% in Q1 2024. This higher utilization, achieved despite a 5% year-over-year decrease in consultant headcount (influenced by a targeted optimization action in Q2 2024), reflects effective resource allocation and strong demand. The sales pipeline remains healthy, with project lead flow increasing 5% year-over-year in Q1 2025 and new project originations up 3%. Management noted that conversion rates of leads to new projects have returned to and remained consistent with historical norms (around two-thirds) since Q4 2023, providing a solid basis for future revenue.

Profitability metrics highlight the company's ability to manage costs and command value. Non-GAAP EBITDA margin was 14.23% on a TTM basis. While Q1 2025 non-GAAP SG&A as a percentage of revenue saw a slight increase compared to the prior year quarter, overall cost management and revenue growth drove significant profit expansion. The effective tax rate in Q1 2025 was 27%, lower than 28% in Q1 2024, primarily due to state tax law changes and increased tax benefits from share-based compensation.

Liquidity remains robust. As of March 29, 2025, CRA had $25.6 million in cash and cash equivalents and $161.1 million available under its revolving credit facility, totaling $186.7 million in liquidity. Net cash used in operating activities in Q1 2025 was $80.0 million, primarily reflecting the payment of fiscal 2024 performance bonuses, which is a typical seasonal use of cash in the first quarter. The company utilized its revolving credit facility, with $85 million outstanding at quarter-end, to manage this cash cycle.

Management is confident that existing liquidity, cash flow from operations, and credit facility availability are sufficient to meet anticipated needs for at least the next 12 months, including operating expenses, talent investments ($27.4 million in Q1 2025), capital expenditures ($1 million in Q1 2025, with FY2025 expected in the $5M-$6M range), debt service, share repurchases, and dividends.

CRA has a stated aim to return half of its adjusted cash flows from operations to shareholders, a commitment it has exceeded over the past four years, returning $178 million ($41M dividends, $137M buybacks at an average price of $96/share). The company continues this practice, paying $3.5 million in dividends in Q1 2025 and expanding its share repurchase authorization by $45 million in February 2025, with $58.1 million available as of March 29, 2025. This consistent return of capital underscores confidence in the business's cash-generating ability and commitment to maximizing long-term value per share.

Outlook and Risks

Encouraged by the strong start to the year and positive trends in lead flow and project originations, CRA has reaffirmed its full-year fiscal 2025 financial guidance. On a constant currency basis relative to fiscal 2024, the company expects revenue in the range of $715 million to $725 million and non-GAAP EBITDA margin in the range of 12% to 13%. This outlook signals management's expectation for continued profitable growth, building upon the record performance of the past year. The guidance assumes sustained healthy demand across the portfolio and effective operational management, including maintaining utilization levels within or potentially slightly above the mid-70s target range.

However, this positive outlook is tempered by acknowledged risks and uncertainties. Management is mindful that volatile global economic, business, and political conditions can affect the business. Uncertainty, stemming from various macro and geopolitical impacts, can sometimes cause clients to pause or delay decisions on matters, mergers, or strategic advice. While the company has successfully operated under different political administrations, potential changes in the regulatory landscape following elections could impact demand trends, particularly in litigation and regulatory services. Management is closely monitoring these potential shifts, noting that significant policy changes typically take time to implement.

Competition for talent remains a key factor. While voluntary attrition rates have trended low, the marketplace, particularly in legal and regulatory services, is experiencing disruption, leading to competition for skilled professionals. This can result in higher compensation costs, which are incorporated into the margin outlook, but intense competition could still pose a challenge to talent acquisition and retention goals.

Other risks include the inherent unpredictability of legal action outcomes, which is central to a significant portion of CRA's business, and potential impacts from inflation, although it has not had a material effect to date. The company's ability to fund future initiatives, including potential acquisitions, could also be affected by economic conditions and capital market environments, although current liquidity is deemed sufficient for anticipated needs.

Conclusion

CRA International's investment thesis is underpinned by its proven ability to deliver profitable growth through a diversified portfolio of high-value, expert-driven consulting services. The company's historical foundation in applying rigorous analytics and economic expertise continues to provide a competitive edge, enabling it to secure complex engagements and command strong margins. Recent record financial performance in fiscal 2024 and Q1 2025, coupled with a reaffirmed positive outlook for fiscal 2025, demonstrates operational strength and resilience.

While macroeconomic and political uncertainties, along with intense competition for talent, present potential headwinds, CRA's established market position, strong client relationships, and disciplined capital allocation strategy (including consistent shareholder returns) provide a solid foundation. The company's focus on investing in key growth areas like Energy and Life Sciences, alongside the continued strength of its core Antitrust and Intellectual Property practices, positions it to navigate the evolving market landscape. For investors, CRAI represents a consulting firm with a track record of execution, a clear strategy for profitable growth, and a commitment to returning value, making it a compelling consideration despite the inherent volatility of its end markets.